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Risk information Past performance is no guarantee for future performance. Fund units may go up or down in value and investors may not get back the amount invested.


Resilient infrastructure companies

The first half of 2022 was a very difficult period for equities. Persistent high inflation and rising interest rates, the war in Ukraine and an ever higher risk of recession drove investors away from risk and equities were traded down steeply. Overall, performance was better for infrastructure companies. In particular, companies with exposure to energy assets such as oil and gas delivered strong performance.

Performance was also negative for Carnegie Listed Infrastructure during the period, but due to its focus on more stable infrastructure companies the fund was considerably more resilient than global equity indexes. The fund delivered weaker return relative to infrastructure indexes, which can be explained by the fund’s exclusion of companies with exposure to energy commodities like oil, gas and coal.

The sectors in the portfolio that have delivered the best returns thus far in 2022 are energy and water, where both electricity producers and electricity distributors were strong performers. Performance was weakest in communications, where telecoms came through relatively well, while performance was poorer for the internet companies.   The strongest performers were Terna Energy, Hydro One and Transurban Group. The companies that delivered the poorest returns were Verisign, Veolia and Liberty Broadband. Value growth in the fund was also assisted by currency tailwinds as the majority of foreign currencies strengthened against SEK, most notably USD.

    We invested for example in the Spanish energy infrastructure companies Acciona and Red Electrica, American water company California Water Services and Japanese rail operator Japan Central Railway.  The first two offer interesting exposure to renewable energy in Europe, while California Water Services operates in the water supply sector in the western United States and has a large share of regulated revenues. Generally speaking, water infrastructure has been an over-valued sector in recent years, but has been traded down during the year to more attractive levels and we grasped the opportunity to invest in this stable and growing sector. Japan Central Railway offers exciting exposure as Japan reopens after the pandemic. The company is the rail operator with the highest revenues in the Shinkansen, has the best lines with connections to the largest cities (Tokyo, Osaka, Kyoto) and the best long-term growth potential, even as they are currently being traded at a lower valuation than the other Japanese rail companies.

    A number of holdings were sold during the period, including Norwegian Telenor, Japanese Exeo and Belgian Tinc, partly to concentrate the portfolio with an even more distinct focus on pure infrastructure and partly for liquidity reasons.


    Infrastructure companies continue to show that they are resilient and better able to weather persistent market anxiety over inflation and the economy. With relatively heavily indebted balance sheets, however, they are more exposed to high interest rate levels. After a steep rate hike in the spring, long-term interest rates have now flattened out and although they have increased, real rates are being traded at levels that remain very low. For example, the US 10-year real interest rate is at slightly over one half percent and long-term real rates in Europe remain negative. This entails persistently low financing costs, especially for companies that can more easily grow revenues with inflation, which bodes well for infrastructure.

    Meanwhile, we are seeing persistently strong demand for infrastructure, especially in energy. The climate transition journey that will be made over the next few decades is going to require massive investments in order to replace all fossil energy generation with renewable sources, which will result in substantial redistribution of profits and resources.

    Although fossil energy prices have shot up thus far in 2022, we see this more as a function of temporary supply disruptions and believe it is likely the price situation will stabilise in the second half of the year or that price trends will actually reverse. Long-term, we know that demand is going to decline while the long-term trend for renewable energy is highly favourable. Long-term trends are also strong and positive in areas such as healthcare properties and telecoms, due to ageing populations and increased digitalisation. Consequently, we are enthusiastic about the potential of sustainable infrastructure to generate good long-term returns.

    Emanuel Furubo


    Emanuel Furubo

    Bachelor of Science, Business and Economics at Uppsala University.